Saturday, December 6, 2008

OWNING MONEY - A Concept to Think About

How much money do you own?  Do you even think of money as something that is owned?

In terms of ownership, we tend to think of things like our home, our car, our furniture, clothes, electronics, even the food in our refrigerator. We own it. It's ours.

What about money? How much money do you own?

To some, this seems an alien concept. Money is a medium of exchange, an indicator of value, a mere number on a piece of paper. It can gauge the value of the things you own, but it is not something you own yourself.


The first step to getting ahead financially (and getting out of debt) is to think about Owning Money and how much money you own - not owe.

When I started out with my financial planning at age 28, I realized that I didn't own a red cent. Money was something that other people owned, and something I owed them. I had debt, I had a paycheck, but money went though my life like water under a bridge. It just flowed and I tried to ride it the best I could.

That was my wakeup call. I realized that if I kept living that way, I would have to work the rest of my life, and never have any control or say over my own life whatsoever. It is true that God has the last laugh on running your life. But when you surrender what little control you have to others, then you are truly helpless.

All my bosses were quite happy when I went into debt or bought a new car. So long as I was living off the "cash flow" in my life and not accumulating wealth (owning money), I was dependent on them for a job. Employees deeply in debt are reliable employees.

Owning money is not hard to do. And anyone who has a job can own money. If you have a job that pays X dollars a year, and you spend Y dollars a year, so long as X is greater than Y, you will end up owning money.  Spend a penny less than you earn.

Sounds simple, doesn't it? Yet few grasp this simple equation. And more disturbingly, many people voluntarily sell themselves into modern economic slavery by making Y greater than X, just so they can have a few extra shiny baubles.

We laugh at the Manhattan Indians for selling the settlers the island of Manhattan for $24 worth of shiny beads and trinkets. But how many people today do the same thing with their personal lives? We sell ourselves into Debt Slavery for a shiny car, a wide-screen teevee, or a gourmet kitchen. It is all just trinkets and baubles.

Like most folks, when I was a youth, if I made $200 a week after taxes, then, by God, I spent $200 a week. In addition to rent and utilities, I spent the remainder on food and beer, toys and restaurant meals. Foolishly, I traded-in a "paid for" car with low miles for a shiny new car with four years of payments attached (and staggering insurance, too!).

I was living "paycheck to paycheck" which so many people complain about, yet the only reason I was doing this was because of my own weakness in spending habits and my unwillingness to do without anything I wanted and thought I could afford.

Anyone can trim their budget by a few dollars here and there and live a lifestyle that is about the same as before - and have money left over. It does take a lot of hard work, thinking, and skill.  And if you make a game of it, it can be fun, because when you win, you win big.  But more people spend their hours making their Farm on Farmville profitable than tending to their real lives.

Once you start to accumulate money "left over" you OWN MONEY, and you can invest. If you can invest enough, you can make even more money. Once you reach a certain level, you might not need to work at all.

But the first step in this process is to grasp the concept of OWNING MONEY, and decide that it is something you want to own - something that is more desirable than a shiny car, or a take-out pizza or a six-pack of beer.

Once you reach that point psychologically, you are ready to invest (see my article on Getting Started with Investmenting).

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